The most significant issue numerous people have with Bankruptcy is without a doubt ‘Will I manage to retain my home?’ and it may be complicated, but occasionally it is achievable.
The only reason where you will be obliged to sell your family house when you declare insolvency is if you have equity in the home so that it is looked as an asset. But exactly how does this work? What is equity? Just how much equity can make it an asset? We receive the questions frequently about Bankruptcy. So below are a few scenarios to demonstrate to you how it all works and really help you learn about Bankruptcy. Bear in mind if you want to know more relating to Bankruptcy and residential properties do not hesitate to get in touch with us here at Bankruptcy Experts Joondalup on 1300 795 575, or check out our website: www.bankruptcyexpertsjoondalup.com.au
Case Study 1. (Tanya & Matt).
5 years ago Matt and Tanya purchased a house in a mining town, they moved there for their job during the mining boom and so prices were high, and life seemed great. However in recent years the work has dried up, prices have dropped and their financial debt has just kept increasing. Now they are needing to take a look at Bankruptcy due to substantial financial debts and mortgage.
They purchased the house for $450,000, and they have $80,000 in additional debts.
They definitely would like to keep their home but wonder if they could. They know that house prices, if anything, have gone down in the region in the last 5 years so to be safe they believe that their home is at present only worth $450,000 after all these years. To make sure they searched www.realestate.com.au sold category of the website to see what various other properties in the streets close by have sold for recently.
Over the past 5 years they have solely been repaying the interest, so they still owe the original $450,000.
Current House Value = $450,000.
Current Mortgage Value = $450,000.
Net Equity Value = $0.
Because there is no equity within this particular residential property the trustee will not ask Tanya and Matt to sell their home when they go bankrupt, so long as they maintain the mortgage payments then all will be fine for them for the 3 years they remain in personal bankruptcy.
By the end of the bankruptcy period of time the trustee will write to them and ask if they want to take control of ownership of their house again and provided that it has not grown in price over the 3 years they have been bankrupt they will be asked to make an offer to have their house back. This is generally somewhere between $3,000 and $5,000 to cover the legal expenses of modifying the land title deed etc. This was a rather basic scenario to demonstrate how a house may be taken into consideration by a trustee when there is no equity involved.
Case Study 2. (Bill & Michelle Johnson).
2 years ago Bill and Michelle bought a townhouse in a nice residential area of Joondalup for $850,000. They tipped in $50,000 as a deposit and now the townhouse two years later is valued at $900,000.
Current House Value = $900,000.
Current Mortgage Value = $800,000.
Net Equity Value = $100,000.
As a result of a recent business problem Bill is about $240,000 in debt. Michelle who carries out work in banking has a separate job and no other financial debts besides the mortgage. Bill can not pay out his financial debts so he is having a look at Bankruptcy. Michelle is worried that she too may need to file for bankruptcy or be driven into it because of the house loan.
In this specific situation the trustee is required to access or get their hands on Bill’s half of the equity which is $50,000 less marketing fees. They might accomplish this in a few ways; 1. Have them sell the home. 2. Welcome Michelle to purchase Bills half of the equity. 3. keep them in the house – but it’s quite improbable in this situation that the trustee will be happy to keep Bill and Michelle in the house since there is just a lot of equity.
So Michelle might have the ability to purchase Bill’s percentage of the equity by coming up with $50,000 and buying out Bills’ half and from that moment its now 100 % Michelle’s house.
Property and Bankruptcy in Australia is challenging and complicated. These two examples above are just the tip of the iceberg as far as your options in Joondalup are concerned. If you should know more about Bankruptcy and residential properties do not hesitate to get in touch with us here at Bankruptcy Experts Joondalup on 1300 795 575, or take a look at our website: www.bankruptcyexpertsjoondalup.com.au.